Answer:
The Relevant Cost for Five Years $52,000.00
Explanation:
‘Relevant costs’ can be defined as any cost relevant to a decision. A matter is relevant if there is a change in cash flow that is caused by the decision.
The Park Ridge Company's Relevant Old Machine Cost for Five Years is
Disposal value now $32,000.00
Annual cash operating costs $20,000.00
Relevant Cost for Five Years $52,000.00
Old Machine
Original cost $200,000 is <em>Sunk Cost</em>
Useful life in years 10 5 - <em>Will be used for the calculation of Depreciation, Therefore is an Irrelevant cost</em>
Current age in years 5 0 - <em>irrelevant year</em>
Book value $100,000 - <em>are not cash flows and so are not relevant.
</em>
Disposal value now $32,000 -
Disposal value in 5 years 0 <em>is without a cost</em>
